An international research organization says the economic rebound in the United States will be slow, and it predicts less than one percent growth for next year. The Organization for Economic Cooperation and Development anticipates the U.S. slump will reverberate throughout the world. The OECD researchers said Tuesday they expect the U.S. recession to last until at least next March.
A prestigious panel of economists earlier this week said the current recession began in March 2001. Thus, if the OECD is correct, the U.S. recession will have persisted for 12 months, three months longer than the last recession of the early 1990s.
We expect the second quarter [of 2002] to be positive," said Peter Jarret, chief of OECD, U.S. division, "but not by enough to match what we call potential output growth. So there is slack still expanding in the second quarter. It is only in the third quarter that the economy will build up enough momentum for slack to dissipate and unemployment will peak and then begin to come down very slightly."
Mr. Jarrett predicts the continuing rise in unemployment will constrain consumer spending and hold down economic growth. The Canadian economist worries that the U.S. slowdown is spreading and that lower trade volumes mean slower growth in Asia and Europe. "When we finalized these numbers a few weeks ago, we put in that world trade growth would basically come to a halt in the second half of this year," he said. "And it's my guess that in fact we were too optimistic, that trade growth is, in fact, negative this past half year."
The Bush administration, not surprisingly, is more optimistic about U.S. economic prospects. Treasury Secretary Paul O'Neill says growth will significantly exceed two percent in 2002.
Prior to this year's slowdown, the U.S. economy had registered a record 10 consecutive years of growth, with the economy expanding by more than three percent annually in each of the past five years.